If Required Reserves Are 20 Per Cent and the Reserve

question 99

Multiple Choice

If required reserves are 20 per cent and the Reserve Bank buys $10,000 worth of government securities, what is the change in the banks' total reserves?

• A) $8,000
• B) $100,000
• C) $20,000
• D) $10,000
• E) $2,000

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Definitions:

Notes Payable

A liability recorded on a balance sheet, representing a written promise to pay a certain amount in the future.

Instalment Payments

Instalment payments are payments made towards the purchase of an item or repayment of a loan that are spread out over a period of time in fixed amounts.

Interest Expense

The cost incurred by an entity for borrowed funds, often related to bonds, loans, and credit lines, and is typically reported on the income statement.

Carrying Amount

The monetary value of an asset or liability as recorded on the balance sheet, factoring in depreciation, amortization, or impairment.